Is the Traditional Business Bank Account Dead? 💀
This post was supposed to be about how brilliant challenger banks and how to get started on your business banking journey. Instead, it’s ended up being about me pondering the power of good tech and what the next 6 months could mean for us all...
Even just three years ago the thought of trudging along to a branch to open a separate business bank account on your day off was an unthinkable waste of time. The forms were immense, the business banking fees excessive and before you even stepped through the door, you weren’t quite sure if you even qualified for one.
Fast forward to 2020 and the wave of challenger banks offering business accounts that are far easier to set up than the big bank names on the high street just keeps growing.
So, if your pre-COVID side hustle is now your main income or you’re looking to start a business from scratch to meet a new normal demand where should you start?
Your first question is a legal one. 👩🏽⚖️
Are you a sole trader, freelancing or part of the gig economy? If yes then you technically don’t need a separate business account because, in the eyes of the law, you and your business are a single entity. However, you can have a separate account which makes it easier to manage your expenses and submit your self-assessment tax return at the end of the tax year.
If you’ve set up a limited company in the UK then you most definitely do need a business account.
Should you stay or should you go?
More than likely you already have a personal account with one of the UK’s high street banks, so your next question to determine if you should open a business account where you are or look elsewhere is, “Will I be handling cash and cheques?”
If your answer is no, you could start your search with a challenger bank. You can set up your account via their mobile apps in minutes and their fees are much lower.
Starling Bank (Ps* you can scan cheques of up to £500 with Starling, or post cheques to it if higher value)
For the love of apps
The next part of this post was supposed to be about physical branches, cash deposit fees and, in hindsight, other incredibly boring pieces of information. But then I started thinking about why we love these new digital banks so much in the first place.
The simple answer is their apps. 📲
What if the high street bank you’ve been with since you were 16 suddenly upped its tech game and made opening a business bank account with them as easy as snapping a photo of your ID and utility bill?
They could take it a step further and automatically transfer 25% of your total income into a separate pot for tax, transfer your salary to your general account on the 1st of the month and automatically invest a set percentage of income into your environmentally responsible pension fund.
You wouldn’t mind the fees (we all pay subscription fees to make our lives easier). The slick branding of Monzo and Starling wouldn’t tempt you and you’d simply keep everything where it is.
So is the traditional business account dead?
I thought my answer would be a resounding ‘yes’. Turns out it’s a no. I think high street banks have just been in a technology hiatus which has been rudely interrupted by a swift shift online thanks to COVID-19.
My closing remarks: keep an eye on your high street bank’s app over the next 6 months. I think fintech for the average person is about to get a lot more exciting, and who knows perhaps the challenger banks will join forces with our well-known banking giants and reshape the financial landscape forever...